Zomato has increased its platform fee from Rs 5 to Rs 6, resulting in a more than 3% surge in its shares, reaching a record high of Rs 232 on July 15. This hike, effective in select markets like Delhi and Bengaluru, is expected to mildly boost the company’s profitability.
The food segment of Zomato handles approximately 87 crore orders annually. A mere Re 1 rise in each convenience fee could potentially enhance EBITDA by Rs 85-90 crore, translating to a 6-7% increase in profitability.
While this fee adjustment is initially limited to specific cities, its impact on EBITDA could range from 1-2% (5-10 bps). Looking forward, analysts anticipate Zomato may further increase platform fees to Rs 8-10 per order in major metro areas, counterbalancing the elimination of delivery charges through loyalty programs.
Analysts foresee stable restaurant commissions in the near term, with the primary drivers for achieving management’s medium-term EBITDA target of 4-5% being ad revenue and platform fees.
This marks Zomato’s fifth platform fee increase in the past year, progressing from Rs 2 to Rs 5 in phased increments. Adjusted EBITDA as a percentage of Gross Order Value (GOV) rose by 80 bps to 3.3% in Q4 FY24 since the introduction of these fees in Q2 FY24.
Analysts project robust margin expansion for Zomato’s food business, anticipating an EBITDA CAGR growth of 35% (Ex ESOPS) over the next two years, with take rates anticipated to climb from 19.7% to 21%.
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